Lending-Based Crowdfunding Is A Nascent Fintech Market

As the U.S. economy continues its struggle to climb out of a deep recession, personal loans remain very difficult to secure. Having shouldered much of the blame for the financial hardships that have befallen consumers across the nation, many banks now require potential borrowers to meet strict criteria for an approval. With the financial institutions being more selective about who they assist, Detroit locals like Ashley Wright are learning that consumers with excellent credit and decent paying jobs are the most likely to make the cut. "Getting an approval was definitely a journey," said Wright, who was in search of a personal loan to help out with school and living expenses. Wright found that a private bank was the best place to turn for

Asymmetric information in lending is a huge risk. When there is misinformation from a lender to a borrower, this can cause a few different problems to arise; for example misinformation about job security or credit history from a borrower to a lender can result in late or missed payments, fraudulent spending of the money lent or the lending amount to be turned as bad debt. Specialization is a tool used for risk management. Specialization in lending helps reduce risk by gathering valuable and accurate information about the borrower. It

The financial crisis of 2007 and 2009 was the worst since the great depression. It was not a single event but a series of crises whose seeds had been planted in yet another recession of 2001 and the era of the internet bubble years earlier (Bodie, Kane, & Marcus, 2011). One of the reasons for the crisis was the rise in subprime lending. Subprime loans were offered to individuals who did not qualify for prime rate loans and carried a higher rate of interest than prime loans (Gilbert, 2011). Another reason behind the subprime mortgage crisis is argued to have been due to the lack of ethics and poor policies such as the Goldman rule which encouraged pursuit of profitable opportunities irrespective of the effects on others (Watkins, 2011). In this paper, I will briefly define financial markets, outline types of financial markets and orders and trading mechanisms in

people's need for extra funding has led to the extension of credit to large segments of the population who were previously deemed unqualified. However, some lenders have tried

Upon passage of the JOBS Act in 2012, the startup community celebrated the bill’s potential. Its intended effect as to herald the next “big thing” by uncorking the excess cash tied up by the meltdown of 2007. The age of crowdfunding had arrived, or so it seemed. While the JOBS Act has been successful in accelerating capital formation, the intentional sequester of Title III by the SEC has the most promising aspect of the Act, Crowdfunding, indeterminate on-hold. Three years of waiting for SEC regulators to define the boundaries and rules of how crowdfunding will become a reality in the U.S. While such delays have proved frustrating to entrepreneurs and investors alike, it has also provided ample time for regulators to examine similarly

Small loans and their relatively high interest rates have recently come under attack by Alabama legislators according to a report posted at Jdsupra.com.

When consumers take out home loans, it is important for consumers to understand whether they can or cannot take out an amount for their home loans in order to reduce the risk of them defaulting on their loans. Consumers can ask financial professionals for advice and come up with a financial planning process to stay on track of their goals. However, sometimes these professionals will not give advice in the consumer’s best interest. One such example of where it can happen is NAB’s ‘Introducer Program’, in which professionals who are able to refer a customer to a bank to make a home loan will earn a commission (NAB’s Introducer Program

So it is also attractive for Jules Kroll to take this opportunity to enter the credit rating industry. In addition, the “issuer pays” model, which used by the big three rating agencies, lets companies shop around for the best ratings, putting pressure on the agencies to inflate their grades. As a result, it is very difficult to argue that they can adequately represent the users’ side. Therefore, Jules Kroll wants to use another model that can assign unbiased and reliable ratings.

Good first impression can impact one’s confidence levels, personality, and self esteem in beneficial ways. Often times, individuals with easy to pronounce or common names are associated with familiarity. This is because those with popular names are often more accepted, and they are perceived as friendly and welcoming. Studies have shown that those with easy to pronounce and popular names are often more successful in life, opposed to those who have less common names (Konnikova). Evidently, a common name will allow one to be more successful and fortunate in life. Although some may claim that having a common name will make a person less unique, it is evident that common names generate good impressions and assumptions. Essentially, the stereotypical “good” name allows for to be more successful in life, contrary to someone with an unfamiliar name. Names also clearly have an overall impact on one’s identity in a positive way in respect to high self-esteem, personality, and self-confidence. Common names typically have more likable associations and qualities, which can impact one's identity positively. Research suggests that, “names that were viewed as the least unique were more likable. People with common names were more likely to be hired, and those with rare names were least likely to be hired” (Goudreau). Essentially, common names are more appealing to others, and they can

* Not only do borrowing and lending rates differ due to taxes and transaction costs, but some individuals are screened out of legitimate credit markets altogether due to informational asymmetries

As technology improves, the wide use of “hard information”, such as the borrower’s credit history, reduces informational asymmetries. Therefore, long-distance small business lending is easier (Frame, Srinivasan, \& Woosley, 2001; Petersen \& Rajan, 2002). However, even with the use of credit score data, collecting ``soft information" still helps local lenders control risks to avoid delinquency (DeYoung, Glennon, \& Nigro, 2008) and provides informational advances in offering more favorable rates (Agarwal \& Hauswald, 2010).

Over the years, both lenders and borrowers have endeavoured towards the possibilities of fundamentally disrupting and disintermediating existential financial links, distancing themselves from the financial main, and building new financial operators.

In early 2011 unemployment was rising, economic growth was stagnating, and families were panicking about making ends meet,all while legal loan sharks were circling the poor. With consumer credit becoming less available, and banks more rigorous in lending to consumers, there has been an increase of payday loans and short-term lenders representing sub-prime lending bussinesses. These institutions specialize in offering fast cash and fast loans, both of which are strongly advertised via different media platforms such as a website, television, andradio stations(Aldohni, 2013). Desperate consumers seeking these short-term financial solutions often end up with long-term financial disasters. The promise of easy credit without a credit history does not come cheap;sometimes costing consumers an Annual Percentage Rate (APR) of as much as 4000 percent. Calculating the terms of loans using a risk-based pricing system, subprime lenders are able to generate varying interest rates of which they offer to borrowers with varying credit histories.(Investopedia).

The purpose of this paper is to analyze if it would be beneficial to break into the loan industry by becoming a financial lender. The mission would be to set the company apart from others recognized, by providing moderately high short term loans and lending services accompanied by debt relief services. Such services would include tax preparation, credit analysis/repair, and financial counseling.

Crowdfunding creates funds for new projects by using internet and social media. This can benefit small business projects to obtain their required funds. A project receives small investments from wide range of individuals through web advertising and social media. The individuals (investors) who have invested in the project may receive incentives such as discounts on the products, early opportunity to purchase their products, inclusion of their name in the list of contributing founders etc., so, they are not purchasing the share of the company. Crowdfunding avoids going to the banks, friends and family to get funds. It also avoids giving up partial ownership of their company. The websites like www.rockethub.com, www.peerfunding.com,